If you are a truck driver or a trucking business owner who operates in more than one state or province, you may have heard of IFTA. But what is IFTA and why do you need to know about it? In this article, we will explain what IFTA is, why it is used, what its purpose is, who needs to file it, and how to file it. We will also provide some tips and resources to help you with your IFTA reporting.
In this text we’ll talk about:
- What is IFTA, why is used and is it mandatory
- Who needs to apply for an IFTA
- Applying and registering for an IFTA account
- IFTA filling dates
- Step-by-step guide how to apply
What is IFTA?
IFTA stands for International Fuel Tax Agreement, which is an agreement among the 48 contiguous states of the United States and 10 Canadian provinces to simplify the reporting of fuel use by motor carriers that operate in more than one jurisdiction. The purpose of IFTA is to ensure that each jurisdiction receives its fair share of tax revenue from the fuel consumed by interstate and interprovincial carriers.
Why is IFTA used?
Before IFTA was implemented in 1983, each state or province had its own fuel tax system and rates. This meant that truck drivers had to obtain multiple fuel tax permits and stickers for each jurisdiction they traveled through. They also had to keep track of the fuel purchased and consumed in each jurisdiction and file separate tax returns for each one. This was inefficient, costly, and time-consuming for both the carriers and the governments.
IFTA has simplified the process by creating a uniform system of fuel tax collection and distribution among the member jurisdictions. Instead of filing multiple tax returns, carriers only need to file one quarterly report with their base jurisdiction, which then distributes the taxes to the appropriate jurisdictions based on the fuel use data. This reduces paperwork, administrative burden, and compliance costs for both the carriers and the governments.
What is the purpose of IFTA?.
The purpose of IFTA is to ensure that each jurisdiction receives its fair share of fuel tax revenue for the maintenance and construction of roads and highways. Fuel taxes are a major source of funding for transportation infrastructure projects in both the U.S. and Canada. By allocating the taxes based on where the fuel is consumed rather than where it is purchased, IFTA ensures that each jurisdiction gets its proportional share of the revenue.
Is IFTA mandatory?
Yes, IFTA is mandatory for all qualified motor vehicles that operate in more than one member jurisdiction. A qualified motor vehicle is defined as any motor vehicle used, designed, or maintained for transportation of persons or property that:
Has two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds or 11,797 kilograms; or
Has three or more axles regardless of weight; or
Is used in combination, when the weight of such combination exceeds 26,000 pounds or 11,797 kilograms gross vehicle or registered gross vehicle weight.
Some exceptions apply for recreational vehicles, government vehicles, buses used in transportation of chartered parties, and vehicles operated under a trip permit issued by a member jurisdiction.
Who is eligible to apply for an IFTA account?
You are eligible to apply for an IFTA account if you meet the following criteria:
- You operate a qualified motor vehicle that has two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds or 11,797 kilograms; or has three or more axles regardless of weight; or is used in combination when the weight of such combination exceeds 26,000 pounds or 11,797 kilograms gross vehicle or registered gross vehicle weight.
- You operate in more than one IFTA member jurisdiction. The IFTA member jurisdictions are the 48 contiguous states of the United States and 10 Canadian provinces: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan.
- You have a base jurisdiction where your qualified motor vehicle is registered, where you have some travel, and where you maintain your operational records.
Some exceptions apply for recreational vehicles, government vehicles, buses used in transportation of chartered parties, and vehicles operated under a trip permit issued by a member jurisdiction.
How to register or apply for an IFTA account online
The easiest and fastest way to register or apply for an IFTA account is online. You can use the web services provided by your base jurisdiction, which is the jurisdiction where your qualified motor vehicle is registered, where you have some travel, and where you maintain your operational records. To find the web services for your base jurisdiction, you can use the IFTA Inc. website and select your jurisdiction from the drop-down menu. You will be directed to the official website of your base jurisdiction, where you can find the online application form and instructions.
Alternatively, you can use a third-party service provider that offers online IFTA registration and filing services. These service providers may charge a fee for their services, but they can also help you with preparing and submitting your documents, calculating your taxes, and keeping track of your records. Some examples of online service providers are Motive and DLFR8Safety.
What documents and fees do you need for an IFTA account?
To register or apply for an IFTA account, you will need to provide some basic information about your business and your vehicle, such as:
- Your business name, address, phone number, email address, and federal employer identification number (FEIN) or social security number (SSN).
- Your USDOT number, if applicable.
- Your vehicle identification number (VIN), make, model, year, and license plate number of your qualified motor vehicle.
- The jurisdictions where you operate or plan to operate your qualified motor vehicle.
- The estimated miles traveled and fuel purchased in each jurisdiction for the previous year or quarter.
You will also need to pay a fee for your IFTA license and decals. The fee varies by jurisdiction, but generally it is around $10 per vehicle per year. Some jurisdictions may also charge a processing fee or a security deposit. You can pay the fee online using a credit card or an electronic check, or by mailing a check or money order to your base jurisdiction.
Where to apply for an IFTA account?
An IFTA account can be applied for in any of the 48 contiguous states of the United States or 10 Canadian provinces that are members of the International Fuel Tax Agreement (IFTA). A carrier must choose one of these jurisdictions as its base jurisdiction, where it will register, file, and pay its fuel taxes under the IFTA rules. A base jurisdiction is the state or province where the carrier is registered for highway use tax purposes, or where the carrier has qualified vehicles that travel on the highways of that jurisdiction, or where the carrier maintains its operational control and records, or where it can make such records available.
To apply for an IFTA account, a carrier must complete an application form and submit it to its base jurisdiction, along with the required fees and documents. The application form can be obtained from the website or office of the base jurisdiction, or from the IFTA website. The fees and documents may vary depending on the jurisdiction, but generally include:
- A non-refundable application fee that covers the cost of processing the application and issuing the license and decals.
- A copy of the carrier’s registration for highway use tax purposes in the base jurisdiction, or proof of registration in another jurisdiction if the carrier does not have qualified vehicles in the base jurisdiction.
- A list of qualified vehicles that the carrier operates in the IFTA member jurisdictions, including the vehicle identification number (VIN), license plate number, and state or province of registration for each vehicle.
- A signed and dated agreement that the carrier will comply with the IFTA rules and regulations, and that the carrier will allow the base jurisdiction and other jurisdictions to audit its records and verify its fuel tax reporting.
Once the application is approved, the base jurisdiction will issue an IFTA license and decals for each qualified vehicle, which must be displayed at all times. The carrier will also receive an IFTA quarterly tax return form, which must be filed with the base jurisdiction by the due date, along with the payment of any taxes owed or the request for any refunds due. The base jurisdiction will then distribute the tax revenue to the appropriate jurisdictions according to the IFTA rules.
IFTA Filing Dates and Deadlines
One of the most important aspects of IFTA compliance is filing your quarterly IFTA tax returns on time. Missing the deadlines can result in penalties, fines, and interest charges, as well as the risk of losing your IFTA license. In this section, we will explain when the IFTA filing dates are, how often you need to file, what happens if you miss the deadline, and some technicalities and rules that you need to pay attention to.
When are the IFTA filing dates?
IFTA filing dates are based on the calendar quarters, which are:
- Q1: January 1 – March 31
- Q2: April 1 – June 30
- Q3: July 1 – September 30
- Q4: October 1 – December 31
The IFTA tax return is due on the last day of the month following the end of each quarter. For example, the Q1 IFTA tax return is due on April 30. The other quarters are due on July 31, October 31, and January 31.
However, if the due date falls on a weekend or a state holiday, the due date is extended to the next business day. For example, if July 31 is a Saturday, the Q2 IFTA tax return is due on August 2, which is the next Monday.
How often do you need to file IFTA?
You need to file an IFTA tax return every quarter, even if you did not operate or purchase any taxable fuel in any member jurisdiction during that quarter. In that case, you need to file a zero or no operation report to avoid any penalties or late fees.
You also need to file an IFTA tax return for each quarter separately. You cannot combine or skip quarters, even if you have a net credit or refund for a previous quarter. You can only claim a credit or refund on your current quarter’s IFTA tax return.
What happens if you miss the IFTA filing deadline?
If you fail to file your IFTA tax return by the deadline, you will be subject to penalties and interest charges. The penalties vary by jurisdiction, but generally, they are:
- A flat fee of $50 or 10% of the net tax liability, whichever is greater.
- An additional interest charge of 0.4167% per month on the unpaid tax amount until it is paid in full.
Some jurisdictions may also impose additional penalties or fees for late filing or payment. For example, Nevada charges a $50 flat fee plus 10% of the net tax liability for late filing, as well as an administrative late fee that increases with each offense.
To avoid these penalties and interest charges, it is advisable to file your IFTA tax return as soon as possible after the end of each quarter. You can also request an extension from your base jurisdiction if you have a valid reason for not being able to file on time. However, an extension does not waive any interest charges that may accrue on the unpaid tax amount.
What are some technicalities and rules that you need to pay attention to?
When filing your IFTA tax return, there are some technicalities and rules that you need to pay attention to. These include:
- You need to file your IFTA tax return with your base jurisdiction, which is where your qualified motor vehicles are registered and where you maintain your operational records.
- You need to report all your mileage and fuel purchases in each member jurisdiction where you operated during the quarter, regardless of whether you purchased fuel there or not.
- You need to report your mileage and fuel purchases in miles and gallons, respectively. If you use kilometers and liters, you need to convert them to miles and gallons using the conversion factors provided by IFTA.
- You need to round all your calculations to two decimal places. For example, if your average miles per gallon is 6.3456, you need to round it to 6.35.
- You need to use the current IFTA tax rates for each jurisdiction when calculating your tax liability or refund. The IFTA tax rates are updated every quarter and can be found on the official website or here.
- You need to keep accurate and complete records of all your mileage and fuel purchases for at least four years from the due date of each IFTA tax return. You may be audited by any member jurisdiction at any time and you need to provide proof of your operations and fuel taxes paid.
By following these technicalities and rules, you can ensure that your IFTA filing is accurate and compliant with the IFTA agreement.
How to File IFTA: A Step-by-Step Guide
Filing your IFTA tax return can be a daunting task, especially if you are not familiar with the process and the requirements. But don’t worry, we are here to help you with a step-by-step guide on how to file your IFTA tax return online or by mail. By following these steps, you can ensure that your IFTA filing is accurate, timely, and compliant with the IFTA agreement.
Step 1: Track and determine the total taxable miles driven in each jurisdiction.
The first step to file your IFTA tax return is to track and determine the total taxable miles driven in each jurisdiction where you operated your qualified motor vehicle during the quarter. A jurisdiction is any state or province that is a member of the IFTA agreement. You can find the list of IFTA member jurisdictions on the official website or here.
To track your miles, you can use trip sheets, quick entries, or GPS upload. Trip sheets are records of each trip that you make, including the date, origin, destination, route, odometer readings, and miles traveled in each jurisdiction. Quick entries are summary records of your total miles traveled in each jurisdiction for each month. GPS upload is a feature that allows you to upload your GPS data directly to the system and automatically calculate your miles for each jurisdiction.
You can use any method that suits your preference and convenience, as long as you keep accurate and complete records of your mileage for at least four years from the due date of each IFTA tax return. You may be audited by any member jurisdiction at any time and you need to provide proof of your mileage and fuel taxes paid
Step 2: Add the quantity or gallons of fuel purchased in each jurisdiction.
The next step is to add the quantity or gallons of fuel purchased in each jurisdiction where you operated your qualified motor vehicle during the quarter. You need to report all your fuel purchases, regardless of whether they are taxable or non-taxable, dyed or clear, or exempt or refundable. You also need to report the fuel type and price per gallon for each purchase.
To record your fuel purchases, you can use receipts, invoices, credit card statements, or electronic data interchange (EDI) reports. You need to keep accurate and complete records of your fuel purchases for at least four years from the due date of each IFTA tax return. You may be audited by any member jurisdiction at any time and you need to provide proof of your fuel purchases and taxes paid.
Step 3: Compute the average miles per gallon for the quarter.
The third step is to compute the average miles per gallon (MPG) for the quarter. This is a simple formula that divides your total miles driven by your total gallons of fuel purchased for the quarter. For example, if you drove 10,000 miles and purchased 1,000 gallons of fuel in the quarter, your average MPG is 10.
You need to round your average MPG to two decimal places. For example, if your average MPG is 6.3456, you need to round it to 6.35.
Step 4: Find out the gallons of fuel consumed in each jurisdiction.
The fourth step is to find out the gallons of fuel consumed in each jurisdiction where you operated your qualified motor vehicle during the quarter. This is another formula that multiplies your total miles driven in each jurisdiction by your average MPG for the quarter. For example, if you drove 1,000 miles in California and your average MPG is 10, your gallons of fuel consumed in California is 100.
You need to round your gallons of fuel consumed in each jurisdiction to two decimal places. For example, if your gallons of fuel consumed in California is 99.8765, you need to round it to 99.88.
Step 5: Compute the fuel tax owed or refund amount for each jurisdiction.
The fifth step is to compute the fuel tax owed or refund amount for each jurisdiction where you operated your qualified motor vehicle during the quarter. This is done by comparing the gallons of fuel purchased and consumed in each jurisdiction and applying the current tax rates for each jurisdiction.
The current tax rates for each jurisdiction are updated every quarter and can be found on the official website or here. You need to use these tax rates when calculating your tax liability or refund amount for each jurisdiction.
To calculate your tax liability or refund amount for each jurisdiction, you need to subtract the gallons of fuel purchased from the gallons of fuel consumed in each jurisdiction. This will give you the net taxable gallons for each jurisdiction. Then you need to multiply the net taxable gallons by the tax rate for each jurisdiction. This will give you the tax amount for each jurisdiction.
If the net taxable gallons are positive, it means that you consumed more fuel than you purchased in that jurisdiction and you owe taxes to that jurisdiction. If the net taxable gallons are negative, it means that you purchased more fuel than you consumed in that jurisdiction and you are entitled to a refund or a credit from that jurisdiction.
You need to round your tax amount for each jurisdiction to two decimal places. For example, if your tax amount for California is 12.3456, you need to round it to 12.35.
Step 6: Find out the total IFTA tax owed or refund amount.
The final step is to find out the total IFTA tax owed or refund amount for the quarter. This is done by adding up the tax amounts for each jurisdiction and getting the net amount that you owe or are owed.
If the net amount is positive, it means that you owe taxes to the IFTA agreement and you need to pay them to your base jurisdiction, which is the jurisdiction where your qualified motor vehicle is registered, where you have some travel, and where you maintain your operational records. If the net amount is negative, it means that you are owed a refund or a credit from the IFTA agreement and you can claim it on your current quarter’s IFTA tax return.
You need to round your total IFTA tax owed or refund amount to two decimal places. For example, if your total IFTA tax owed or refund amount is -123.4567, you need to round it to -123.46.
How to file your IFTA tax return online or by mail.
Once you have completed these six steps, you are ready to file your IFTA tax return online or by mail. You can use the web services provided by your base jurisdiction, which can be found on the official website or here. You will need an IFTA license and account number to file your IFTA tax return online.
Alternatively, you can file your IFTA tax return by mail by printing out the IFTA tax return form and mailing it along with your payment (if applicable) to your base jurisdiction. You can find the IFTA tax return form and instructions on the official website or here you can find links for each state.
